Year-End Tax-Planning Tips

Here are practical year-end tax planning tips that apply broadly, with notes where rules commonly differ. 

1. Maximize Tax-Advantaged Contributions

Contribute as much as possible before year-end:

  • 401(k) / 403(b): Increase salary deferrals to reduce taxable income

  • Traditional IRA: Possible deduction depending on income

  • Roth IRA: No deduction now, but tax-free growth

  • HSA (Health Savings Account): Triple tax benefit (deductible, grows tax-free, tax-free withdrawals for medical)

💡 HSAs are often the most overlooked and powerful tool.

2. Harvest Capital Losses (and Gains Strategically)

  • Sell losing investments to offset capital gains

  • Up to $3,000 of net losses can offset ordinary income

  • Carry forward unused losses indefinitely

  • Avoid wash sale rules (don’t repurchase substantially identical securities within 30 days)

3. Defer Income or Accelerate Deductions (If Appropriate)

Depending on whether you expect a higher or lower tax rate next year:

  • Defer income: delay bonuses, invoices, or distributions

  • Accelerate deductions:

    • Property taxes (subject to SALT limits)

    • Mortgage interest

    • Medical expenses (if close to AGI threshold)

4. Bunch Itemized Deductions

If you’re near the standard deduction threshold:

  • Combine charitable gifts, medical expenses, or taxes into one year

  • Consider a Donor-Advised Fund (DAF) to deduct now and give later

5. Make Charitable Contributions Smartly

  • Donate appreciated securities instead of cash (avoid capital gains tax)

  • For those over 70½, use Qualified Charitable Distributions (QCDs) from IRAs

  • Ensure donations are made by Dec 31 and properly documented

6. Review Withholding & Estimated Taxes

  • Avoid penalties by checking if enough tax has been paid

  • Adjust W-4 or make an estimated payment if needed

  • Especially important if you had:

    • A big bonus

    • Investment gains

    • Side income

7. Small Business & Self-Employed Planning

  • Purchase needed equipment (possible Section 179 or bonus depreciation)

  • Contribute to SEP IRA, Solo 401(k), or SIMPLE IRA

  • Prepay certain expenses if cash-basis

  • Review eligibility for the Qualified Business Income (QBI) deduction

8. Review Credits & Expiring Benefits

Check eligibility for:

  • Child Tax Credit

  • Education credits (American Opportunity, Lifetime Learning)

  • Energy credits (solar, EVs, efficiency improvements)

  • Dependent care or adoption credits

9. Estate & Gifting Planning

  • Use annual gift tax exclusion (no filing required)

  • Review beneficiaries on retirement accounts

  • Consider trust funding or estate planning updates

10. Plan Ahead for Next Year

  • Adjust investment allocation for tax efficiency

  • Rebalance portfolios in taxable vs. tax-deferred accounts

  • Schedule a tax projection early next year

Final Tip

Year-end tax planning works best when aligned with:

  • Cash flow needs

  • Investment goals

  • Long-term planning (not just tax savings)